Cenovus Energy delivered strong operational performance across its portfolio in the second quarter of 2024, with solid production from its upstream assets and improved crude throughput at the company’s U.S. refineries, which operated at an overall utilization rate of 93%. Net debt was $4.26 billion at June 30, 2024, and in July the company achieved its net debt target of $4.0 billion. As a result, beginning in the third quarter, Cenovus will begin returning 100% of excess free funds flow (EFFF) to shareholders, as per the company’s shareholder returns framework.

“With the achievement of this significant financial milestone, we are now in a position to substantially increase our shareholder returns,” said Jon McKenzie, Cenovus President & Chief Executive Officer. “We will continue our focus on safely delivering profitable and predictable operations, while progressing our growth projects to further improve the resiliency of the company.”

Recent highlights

• Achieved net debt target of $4.0 billion in July, immediately shifting to returning 100% excess free funds flow to shareholders.
• As a result of strong first half performance, increased the midpoint of Upstream production guidance to 797,500 barrels of oil equivalent per day (BOE/d)1 and the midpoint of Downstream throughput guidance to 655,000 barrels per day (bbls/d). Capital investment range is unchanged.
• The Narrows Lake tie-back pipeline to Christina Lake is expected to achieve mechanical completion by the end of the year, and remains on schedule to deliver first oil mid-2025.
• At Sunrise, the company began steaming two well pads which will be brought on production in the third and fourth quarters of this year.
• Achieved significant milestones on the West White Rose project as the concrete gravity structure reached its final height and topsides were structurally completed.
• Safely completed the largest turnaround in the Lloydminster Upgrader’s history, with the facility now returned to full operations.

Financial results

Second-quarter cash from operating activities, which includes changes in non-cash working capital, was about $2.8 billion, compared with $1.9 billion in the first quarter of 2024. Adjusted funds flow was approximately $2.4 billion, compared with $2.2 billion in the prior period and free funds flow was $1.2 billion, in line with the previous quarter. Second-quarter financial results were positively impacted by higher benchmark crude oil prices and a narrowing of the light-heavy crude oil differential, partially offset by higher feedstock costs in the company’s Downstream business and increased condensate prices. Net earnings in the second quarter were $1.0 billion, a slight decline from $1.2 billion in the previous quarter, primarily as a result of higher purchased product, and transportation and blending costs.

Long-term debt, including the current portion, was $7.3 billion at June 30, 2024, in line with the previous quarter. Net debt was approximately $4.26 billion at June 30, 2024, a decrease from $4.8 billion at March 31, 2024, primarily due to free funds flow of $1.2 billion and a release of non-cash working capital. These factors were partially offset by shareholder returns of $1.0 billion. In July, the company achieved its net debt target of $4.0 billion, and will now return 100% of EFFF to shareholders in accordance with its financial framework.

Growth projects and capital investments

In the Oil Sands segment, the company continues to progress the tie-back of Narrows Lake, building a 17-kilometre pipeline connecting the reservoir to the Christina Lake processing facility, which will add between 20,000 bbls/d and 30,000 bbls/d of production starting in late 2025. The project is now 88% constructed, with the first two pads drilled, and hydro testing of the first segment of the line was completed in the second quarter of 2024. At Sunrise, the company began steaming two well pads which will be brought on production in the third and fourth quarters of this year, and one additional well pad will come online in early 2025. Additionally, the optimization project at Foster Creek remains on schedule for startup by the middle of 2026, with most modules and major pieces of equipment in place and pipe installation underway. At the Conventional Heavy Oil assets, the rig fleet has ramped up to four rigs. The company expects to see increased drilling activity in the second half of the year and a higher exit production rate for the asset.

Capital in the Conventional business was directed towards drilling, completion, tie-in and infrastructure projects. The West White Rose project reached a significant milestone with the completion of major construction on two key components of the platform, with the concrete gravity structure reaching its final height and the topsides structurally completed. The West White Rose project is now approximately 80% complete and progressing on-schedule, with first production expected from the field in 2026. In the Downstream, capital was primarily directed to sustaining activities and reliability initiatives at the company’s operated and non-operated assets.

Production

Total upstream production was 800,800 BOE/d in the second quarter, in line with the first quarter. Foster Creek volumes were 195,000 bbls/d compared with 196,000 bbls/d in the first quarter and Christina Lake production was 237,100 bbls/d, in line with the first quarter. Christina Lake will commence planned turnaround activity in September, which is expected to reduce third-quarter production volumes by approximately 45,000 bbls/d. Sunrise production was 46,100 bbls/d in the second quarter, a slight decline from the previous quarter, reflecting a planned outage. Lloydminster thermal production was 113,500 bbls/d, which reflects a successful redevelopment program and base well optimization. Lloydminster conventional heavy oil production was 18,100 bbls/d, in line with the first quarter. In the second quarter, Cenovus loaded its first vessels at the Westridge Marine Terminal following the successful startup of the Trans Mountain pipeline expansion.

Production in the Conventional segment was 123,100 BOE/d in the second quarter, an increase from 120,700 BOE/d in the prior quarter.

In the Offshore segment, production was 66,200 BOE/d compared with 64,900 BOE/d in the first quarter. In Asia Pacific, sales volumes were 57,800 BOE/d, reflecting strong natural gas demand in the region. In the Atlantic, production was 8,400 bbls/d, up from 7,200 bbls/d in the prior quarter as the non-operated Terra Nova field continues to ramp up to full rates. Sales volumes in the Atlantic region in the second quarter were 14,800 bbls/d, compared with 3,900 bbls/d in the first quarter. 

KeyFacts Energy: Cenovus Canada country profile